Crude Oil Price Update – Key Level to Watch is $44.06

August West Texas Intermediate crude oil futures are trading lower shortly before the regular session opening. Yesterday’s U.S. Energy Information Administration’s weekly inventories report may have shown a bigger than expected drawdown, however, investors are reacting to the bearish increase in U.S. production.

Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the $47.32 main top on July 5.

The main range is $42.05 to $47.32. Its retracement zone at $44.69 to $44.06 is currently being tested.

This zone is very important because trader reaction to it will determine the next major move by the market. Aggressive, counter-trend buyers may come in to support the market in an effort to form a potentially bullish secondary higher bottom. Sellers are going to try to drive the market through this zone in an effort to solidify the importance of the $47.32 main top.

Forecast

Based on the current price at $44.31 and the earlier price action, the direction of crude oil the rest of the session is going to be determined by trader reaction to the short-term Fibonacci level at $44.06.

A sustained move under $44.06 will indicate the presence of sellers. This could drive the market into an uptrending angle at $43.43. If this fails then look for the selling to extend into the next angle at $42.74. This is the last potential support angle before the $42.05 main bottom.

Holding $44.06 will signal the presence of buyers. If this occurs then look for a rally into a cluster of resistance at $44.69, $44.80, $44.97 and a downtrending angle at $45.32.

It’s going to take some strong buying to get through this cluster of resistance, but if buyers can overtake $45.32 then look for the rally to extend into the next downtrending angle at $46.32.

Trader reaction to $44.06 will tell us if the selling is getting stronger.